Tuesday, May 22, 2012Last Update: 7:28 AM PT

Microsoft Faces U.S. Import Ban on Xbox 360

WASHINGTON (CN) - The International Trade Commission should ban import of some Microsoft Xbox gaming consoles into the United States because they infringe on Motorola patents, an administrative law judge said. The recommendation is limited to the 4GB and 250GB versions of the Xbox 360 S console. Judge David Shaw also recommended that the commission prevent sale of the consoles with a cease-and-desist order, and that Microsoft post a bond equal to 7 percent of the declared value of unsold Xbox inventory already in the country. Shaw's recommendation decision follows his April determination that Microsoft had infringed on four Motorola patents related to secure wireless communication and transmission of video content between controller devices and game consoles. The public version of Shaw's initial determination has not been released while the companies petition to remove any proprietary information. Motorola filed its initial complaint with the ITC in November 2010, claiming that the Xbox used Motorola-developed technology that allows set-top boxes to decode transmissions between its Droid2 and DroidX mobile devices. Microsoft argued that Shaw's exclusion order does not serve the public interest because it would leave consumers of video game consoles with only two options to satisfy their needs: the Sony Playstation and the Nintendo Wii. Shaw rejected that argument, finding that the public interest in enforcing intellectual property rights outweighs any potential economic impact on video game consol buyers. Moreover, he said, Microsoft did not even try to show that its competitors were incapable of meeting demand for the consoles. Microsoft and Motorola were also diametrically opposed to the bond value needed to prevent sales of the devices during a presidential review period. While Microsoft called a bond unnecessary, Motorola argued that the bond should be worth 100 percent of the declared value of unsold Xbox inventory. Microsoft said Motorola failed to show that anyone bought Xboxes in lieu of Droids or set-top converters, but it argued that a more reasonable bond would be equal to the value of a reasonable license for the technology at issue. It estimated that figure at 2.5 percent of the wholesale value of the consoles. The public version of Shaw's remedy recommendation redacts the data he used to calculate the 7 percent figure because. Microsoft and Motorola have been in a patent war for several years, with Microsoft claiming that Motorola refuses to abide by requirements set by the Institute of Electrical and Electronics Engineers Standards Association to set reasonable license fees of essential technology. Earlier this month a federal judge in Seattle blocked an attempt by a judge in Germany to ban sales of several Microsoft products that the German court found infringed on Motorola's video-compression technology. Under section 337 of the Tariff Act, administrative law judges investigate allegations of intellectual property infringement against goods imported into the United States. Their initial determinations and recommended remedies then go to ITC commissioners for consideration. The commissioners can let the initial determination stand, in which case it becomes the official determination of the ITC. Commissioners can also adopt the determination, amend it or send it back for further consideration. If Shaw's determination and recommendation become final, President Barack Obama will have 60 days to review the decision. After the 60 days lapse ITC orders can only be appealed to the Court of Appeals for the Federal Circuit.